Aphria Inc (OTCMKTS:APHQF) is Sitting at the Head of the Class

Aphria Inc (OTCMKTS:APHQF) has been a consistent top-tier play in the Canadian cannabis space over the past 6 months. The company has continually impressed us with its strong strategic execution in terms of both diversifying revenue streams and creatively deploying cash from operations to multiply returns — which is essential given the whopping stockpile of $116M in cash currently sitting on the balance sheet. But Aphria has also executed very well in its core business.

As a case in point, the company recently announced that it has executed a previously announced definitive offtake agreement for 60,000 kgs of cannabis production with Nuuvera Inc. (TSXV: NUU). According to the release, “On January 8, 2018, Aphria announced that it had entered into a strategic relationship with Double Diamond Farms (“Double Diamond”) to provide Aphria with 120,000 kgs of annual cannabis production, and Nuuvera and Aphria announced on January 11, 2018 that they were negotiating a definitive offtake agreement for half of such production. The now executed definitive offtake agreement will supply Nuuvera with 60,000 kgs of such annual cannabis production.”

Aphria Inc (OTCMKTS:APHQF) bills itself as a company that produces, supplies, and sells medical cannabis in Canada. Its cannabis products include dried flowers and cannabis oils. APHQF sells its products through its online store and telephone orders, as well as MMPR licensed producers.

The company offers sativa, indica, and hybrid medical marijuana products, as well as cannabis oils. It also provides support services in the form of medical consultations, group therapies, and rehabilitation to veteran and first responders. The company sells its products through its online store or phones, as well as engages in the wholesale shipping of medical marijuana plant cuttings and dried buds to other licensed producers.

Aphria Inc. is headquartered in Leamington, Canada.

According to press materials, “APHQF is one of Canada’s lowest cost producers, produces, supplies and sells medical cannabis. Located in Leamington, Ontario, the greenhouse capital of Canada. APHQF is truly powered by sunlight, allowing for the most natural growing conditions available. We are committed to providing pharma-grade medical cannabis, superior patient care while balancing patient economics and returns to shareholders. We are the first public licensed producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters.”

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As noted above, the company managed to strengthen a core supplier agreement with a key partner, elevating its base of estimated sales going forward this year. This is multiplicative, as discussed because the company has already posted several wins in terms of deploying cash from operations in creative ways to increase shareholder value. This isn’t just a momentum stock in a hot space. This is a strong execution display by a high-quality business.

“I am delighted to report that, through this offtake agreement, Nuuvera has now secured the supply necessary to accelerate our initiatives internationally and here in Canada,” said Nuuvera CEO, Lorne Abony. “Our comprehensive partnership with Aphria has long been a core strength of Nuuvera. Today this partnership has grown even stronger with the expansion of our offtake arrangement, through which Nuuvera further leverages Aphria’s best-of-breed know-how in harnessing the power of the sun to grow trusted, consistent and medical-grade cannabis.”

“This extension adds to our valuable distribution agreement with Nuuvera and advances our international expansion plans,” said Vic Neufeld, Chief Executive Officer of Aphria. “The scale of our growing operations in Leamington, especially with the recent addition of Double Diamond Farms, enables us to adequately supply Nuuvera with medical-grade cannabis to accelerate their global strategy. We look forward to continuing to meet the needs of our partners and creating additional shareholder value.”

Now commanding a market cap of $2635.1M, APHQF has a significant war chest ($116.1M) of cash on the books, which must be weighed relative to about $1.6M in total current liabilities. APHQF is pulling in trailing 12-month revenues of $25.5M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 62.7%. We will update the story again soon as further details emerge. Sign-up for continuing coverage on shares of $APHQF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $APHQF, either long or short, and we have not been compensated for this article.